Category: Growth

My team was recently working on a new product and one of the issues that came up was what color scheme would generate the best results. Rather than rely on our (great) designers and team’s overall understanding of the market, we looked into the literature of consumer behavior and the research on what behavior different colors generated. Reinforcing the value of spending time on your color choices is research that shows 90 percent of snap judgments on products can be based on color. While there is no magic formula (unfortunately make everything dark blue or yellow is not a silver bullet), you can apply consumer behavior to leverage your color choices.

Color and branding

The first area we looked to leverage color was in our branding, ensuring our logo and app icon generated a strong positive response from players. A good article on Entrepreneur, The Psychology of Color, explained that you initially need to ensure your choice of colors is considered appropriate for your product. What would be effective in a bar is very different than the colors you should use for a funeral home. Customers decide a brand’s personality largely by its color scheme. The colors also make the brand more or less recognizable (IBM is defined as Big Blue), and people prefer recognizable brands.

Color choices also can create a unique visual identity. This helps to differentiate the brand and make it more memorable.

The key to choosing the right colors for your brand are using ones that convey the personality you want people to associate with your brand. If it is excitement, colors like red and yellow generate that response. If it is trust, you are best going with a lighter shade of blue. Colors also mean different things in different contexts (green can be environmentally friendly or related to money).

Color and gender

You also need to tailor your color scheme to the gender of your target customer. Blue is popular with both genders while purple is the most polarizing (loved by women and disliked by men). In general, men prefer bold colors while women prefer softer colors. Men are also more amenable to shades of colors as their favorites (colors with black added) while women prefer tints of colors (colors with white added).

Color and conversions

The true impact of color on conversion (making sales) is that you should use color to make an item or monetization opportunity jump out. A red “Buy Now “ button is likely to work great on a predominantly green and blue page but not work as well as a green button on a page with a lot of red. The key is using color to highlight what you want users to consider purchasing. You should use color to leverage the isolate effect.

Think about color

The key to this article is that color is important on multiple levels to your business and should not be an afterthought. The right color choices will create the brand identity you are looking for, appeal to your target market and make customers more likely to purchase.

Key takeaways

Color is a very strong determinant of consumer behavior and you should spend time to make color choices with your brand, logo and product that drive the behavior you are seeking.

Color scheme needs to be consistent with your brand, creating the brand personality you are trying to build.

The key to driving conversions is using color to isolate the elements that will drive purchases, less important than the actual color choices is using colors that do not appear elsewhere on the page or app.

Acquisition

As you improve retention of existing users, you also acquire more new customers. A number of organic acquisition channels, such as virality and user-generated content (UGC), work when existing users take an action that introduces new users to your game or product (via inviting friends, sharing, word-of mouth, creating new content, etc.). A larger base of active users leads to better acquisition metrics. Players remaining in your game or product can invite new people to the product, so the more you retain, the more players who can send invites.

Monetization

Monetization is the second area impacted by retention. I get very frustrated when people, usually Product Managers, act as if there is a trade-off between retention and monetization. The reality is that retention drives monetization rather than damaging it. First, retention allows players to spend more frequently. If you retain a customer for three months rather than one month, they have 3X the opportunity to spend. Moreover, if your model is more robust than simply discreet purchases (either in-app purchases for a game or sales for a retailer), you also generate a longer stream of advertising or subscription revenue the longer the user is engaged with your product.

User acquisition becomes a competitive advantage

Paid user acquisition is one of the critical elements to growing a game or app, you need to have a positive return on ad spend to justify scaling your product. More importantly, since a bidding model drives user acquisition in the app space, with acquisition muscle you can push competitors out of acquisition channels, dominating a market and growing faster. As described earlier, your users are generating more revenue (they are in the product longer so spending more often and driving ad and subscription revenue), you can afford to outspend your competitors.

Payback period

Retention accelerates your payback period, allowing you to avoid raising additional funds or providing more free cash flow to funnel into acquisition. Payback period is the amount of time to pay for your full loaded user acquisition costs. As Balfour writes, “if you have a longer payback period, you either need to raise more money to fuel acquisition or wait longer to reinvest in acquisition. If you have a shorter payback period you will be able to reinvest the cash earned sooner in acquisition. Since improving retention drives monetization – meaning you make more money over a designated period of time – it also shortens your payback period.”

Build with retention top of mind

With retention driving so much value, you need both to create products that will retain customers or players and then the live services need to focus on improving retention. While it is sexy to try to boost ARPDAU, you will create the most value by strengthening your retention.

Key takeaways

Retention is the most important area to focus on, as it drives four areas critical to growth: virality, monetization, paid acquisition and payback period.

Retention generates more users because there is more virality, word of mouth, user generated content and an ability to spend more to acquire.

Retention drives revenue because players have more opportunities to make purchases and generate additional advertising and subscription revenue.

In 2018, if you are not delivering a personalized customer journey in your game or product you will fail. Personalization, for marketing, for customer experience, for CRM, for almost everything, is the current buzzword but it is still rare that companies have a comprehensive plan to create a personal experience. David Norton, former CMO at Harrah’s Casino group and architect of its Total Rewards program, discusses several ways companies can personalize effectively in his book The High Roller Experience.

Personalization is critical not only to a great customer experience but also to optimizing efficiency. As Norton writes, “personalizing the marketing communication approach will dramatically improve the efficiency of marketing spend both by eliminating activities that will not be fruitful and by improving response through more appropriate offers.” As your competitors are already optimizing, if you are not you will not be able to spend as many marketing dollars as they can, putting you at a fatal disadvantage.

How to create a personalized experience

Realistically, you are not going to have one-to-one personalization on day one, so you need practical planning to create a personal experience. A great way to start is replicate what Harrah’s did as a way to improve its marketing effectiveness, using a basic life cycle approach: new business, non-loyal, loyal, and defector. If you initially communicate differently with these segments, you will see an increase in overall ROI.

You also need to leverage the data you have on customers beyond the typical events. At Harrah’s, they looked at implied preferences based on all the information they had about their customers normal behavior, such as what customers did on their visits to our properties, including games played, offers redeemed, and nongaming activities, and then stored the preferences at a customer level for easy use in campaigns. They noted whether the customers preferred slot or table games, if they participated in gaming tournaments, if they most often came midweek or on the weekend, how often they redeemed offers when they came, what type of entertainment they preferred, which channel of communication they preferred, and a host of other factors. They used these implied preferences as inclusion and exclusion rules in campaigns. By excluding customers from programs that they had no chance to respond to based on their past behavior, they significantly improved response rates and cost savings. Most importantly, as Norton wrote, “we made our customers happier.”

Find the segments with high ROI

As alluded to above, you do not need to create hundreds of micro-segments initially but you do need to determine which segments you should invest in. Non-loyal customers represent a particularly attractive segment to target, as this is where you have the biggest opportunity to win market share. At Harrah’s, they targeted this segment by giving them increased value for more frequent visits, generating a significant increase in revenue from this group than they had predicted. In gaming, this creates opportunities, especially in the social and real money casino spaces, where players normally play three to five competitive apps.

Another segment rich with opportunity is defectors. Harrah’s found a way to identify those customers who had broken their typical visitation pattern as opposed to the standard inactive program practice of waiting 6 or 12 months to reach out to them, at which time they would have been long gone. This practice created lower churn and more value from this segment.

Treat VIPs extra special

I have written multiple times about VIP, and you need to ensure your personalization extends to giving VIPs a very special experience. This includes making sure you not only identify VIPs who make a large purchase in one product (or in Caesars case one property) but the ones who have the highest lifetime value. For an online company, the key is looking at number of transactions and adding across products to get the best picture of who your true VIPs are. You then need to treat VIPs in one product as VIPs in all your products. One of the biggest failures of personalization is when a VIP in one product or one retail location then goes to another and is treated as a standard customer.

Personalize all touch points

It is not just personalizing communications that is critical but you also need to personalize all the core functions. According to Norton, personalization needs to extend to brand, loyalty and customer service. As Norton writes, “if a company can execute against all three of these well, it is going to outperform its competitors….Customers increasingly want a seamless experience across touchpoints with a brand, and contact channels are often one of the greatest frustration points.”

Do not forget customer service (CS)

Given that you need to personalize all touch points, the one that companies most often miss is customer service. The service profit chain is not a theory but a powerful motivator and value creator.

It is absolutely essential, however, to think about the holistic customer service experience and understand the interplay among various channels. The call center and other contact channels are a valuable commodity. When personalized, CS can drive revenue and brand advocacy and provide valuable customer data. Norton writes, “I have always viewed customer care as a critical marketing channel that can build customer relationships, be a source of relevant information about the customer, and of course turn demand into revenue.“ Many of the product improvements that have led to the most revenue growth in my past two positions originated from feedback from our customer facing team members and VIP hosts.

CS is also an area for innovation, as you can improve your offering through technology. Customers may embrace technology before your company might, so CS can be a great vehicle to try new tools and channels.

To truly leverage customer service as a tool to improve personalization and the customer journey, you need to measure it at a granular level. This helps drive service improvement efficiently.

Testing is the key

You need to constantly test to ensure you are personalizing optimally. As Norton writes, “constantly testing and learning and holding out control groups is the best way to optimize marketing spend. This allows companies to find the most appropriate message and to spend .”

The first step is to automate the test process. If it takes months to evaluate what happened, the results become useless as the competitive landscape has changed.

It is also critical to have a control group for each campaign and program. While this policy seems automatic, there is often pressure to release what you believe is the optimal campaign or communications to everyone, as you do not want to leave money on the table. Holding out customers, however, from a specific marketing program is much more informative in determining which marketing activities drive the most incremental profitability, changing the customer’s behavior to spend more with you than with a competitor. This is also a better strategy than a universal control group, which does not show you the relative performance of different marketing programs.

As mentioned above, customer service is critical to personalization and measuring customer service with a significant level of granularity provides tremendous insight about the customer experience and helps identify areas for improvement. As Norton writes, “being able to correlate improved service to increased revenue, and developing a well-constructed incentive plan, leads to great outcomes for both a company and its customers— especially when there is innovation around challenged service touchpoints that drive overall customer satisfaction with the brand.”

Personalize, personalize, personalize

The key to success in the current business environment is personalization, your customers expect it, and if you do not deliver they will go to a competitor. And you need to deliver not only in communication but also in customer service and VIP. Then you need to optimize to ensure you are delivering a truly effective personal experience. This is not a secret to gaining competitive advantage, it is the cost of doing business.

Key takeaways

Personalization improves the efficiency of marketing spend by eliminating activities that will not be fruitful and by improving response through more appropriate offers

Think holistically about the customer journey. Ensure all parts of it are personalized, from the initial communication through the product to customer service and support.

Testing and control groups are the best ways to optimize your marketing and ensure your personalization efforts are creating value.

When I accepted my first job in the social casino (free to play slot machines) space, I did not understand fully (or believe) why anyone would pay to play a casino game (slots, poker, bingo, etc.) if they could not win money. After all, people gambled to win money, or so I thought. It was, however, difficult to argue with the data that showed social casino consistently the most profitable genre in social and mobile gaming. Moreover, I also did not fully understand why people would spend real money for a virtual good (i.e. a virtual tractor) and assumed the two must be related.

Those questions prompted me to do research before starting my position in the social casino, which led to my blog post Why would anyone buy a virtual good? . The post also included information that people gamble for three reasons – economic, symbolic and pleasure-seeking – and only one of them was tied to making money.

Chen, Shoemaker and Zemke segmented slots players into four clusters based on five sets of factors, and by looking at each cluster it provides a good understanding of the people who play and monetize on social slots products. The five factors are ego-driven, learning, relaxation, excitement and financial rewards. Based on how players ranked the various factors, the authors were able to create four distinct clusters that show different types of players. Below, I recap the four clusters, which you can then use to make your products and marketing better fit for your target customers.

The “excitement gambling seekers” cluster

Players who are excitement gambling seekers are playing for the stimulation. Their primary motivation is the strong sensations they experience while playing, the positive memories from winning moments and the thrill of winning or losing. Excitement seekers were the largest cluster of slots players (27.5%) in the research.

The key takeaway about this cluster is they are not playing to win or make money, they are playing for the same reason someone rides a roller coaster, excitement.

The “relaxation gambling seekers” cluster

These customers are playing slots to escape. Their key motivation is to release tension and because the game is fun. They will often credit slots as the best way to relax completely. This cluster is more interested in the experience of playing rather than focusing on winning. This is has more men than women (51.5% to 49.5% respectively). 25.5 percent of slots players make up this cluster.

The key takeaway with this cluster is that they are playing largely for the same reason someone goes to the cinema or reads a book, to relax and escape. As with the excitement cluster, they are not looking for financial rewards.

The “utilitarian gambling seekers” cluster

These are players who play as a means of socialization, communing with friends or as an escape from everyday boredom. It is referred to as utilitarian because the purpose is functional (utilitarian) and players gamble to satisfy experiential motives. About 20 percent of the players sampled fell into this cluster (which was also the oldest group).

These players place little value in some of the features many social casinos focus on. They do not care about themes or progressive jackpots. One of their most important considerations is the minimum bet of the slot machines.

Earlier this month, I wrote about Robert Thaler’s work on behavioural economics, including his theory regarding mental accounting. Mental accounting is a psychological theory of how limited cognition affects spending, saving, and other household behavior. In particular, people group their expenditures into different categories (housing, food, clothes, etc.), with each category corresponding to a separate mental account. Each account has its own budget and its own separate reference point, which results in restricted movement between the accounts. When integrated with the research of Chen, Shoemaker and Zemke, mental accounting explains how people have a set sum to spend on slots and will chose the purchase that allows them to optimize use of those funds.

The “multipurpose gambling seekers” cluster

The multi-purpose cluster, as its name suggests, play for several reasons. Players in this cluster play because slots are fun but also because there is a good chance to win and it is in their budget. These are players who think (fantasize) about what they will do with their winnings and want to make a lot of money. These players normally do not care about themes around games. About 27 percent of slots players are in the multipurpose cluster.

The takeaway with this cluster is that it combines a desire to win money with the entertainment value of playing. These are the players who might seek a real money alternative when it is available but play free to play (social) slots if they are in a location where they do not have access to real money.

How men and women differ

One other interesting insight in this research is the difference between male and female slots players. Many female players were excitement gambling seekers or utilitarian gambling seekers, while male players were relaxation or multipurpose gambling seekers. Thus, if you target different genders, your messaging and promotions should apply to what they are more likely to find important.

Remember these are real money players

The most important takeaway from the above cluster analysis is that it was done with real money land based slots players, not social players. This is critical because even people gambling in the traditional sense are largely not gambling to make money but for excitement, relaxation, etc. Once their motivations are understood, it is obvious why people would spend to play slot machines where the real money opportunity does not exist. As the authors write, “American slot players were mainly motivated by hedonic and experiential motives…gambling is a type of recreation or entertainment in America.” Hence, why social casino is such a strong and growing genre.

Key takeaways

Research shows that there are four types of slots players, with each group having different motivations.

Three of the four groups are driven by non-economic reasons (excitement, relaxation, fun, etc.) to play slots, thus they get the same satisfaction from social casino products that they get from playing real money slots.

You need to engage with, not talk to, your customers

The focus of marketing is now on an engagement model and not a sales model, where you provide actual value to your customer or player. Traditional disruptive one-way advertising messages are being replaced with deeper two-way relationships with consumers. As a business, you have to consistently engage your customers; which requires compelling content that is interesting, creates value, and has opportunities for interaction. A true value exchange is one that creates loyal customers.

A key dynamic driving this engagement model is that consumers are no longer captive. A captive audience is one where a message is created and channeled to consumers who passively receive content. Consumers are now the beneficiaries of a power shift. The power shift is from media companies who used to control what consumers saw, when they saw it, and how they saw it. Now the power shift is with the consumers.

As they pointed out in the course, the notion of captive audiences is one that lives in the past, even in the online environment. There is a growing acknowledgement that marketing has changed more in the past one to two years, than it has in more than half a century before.

To succeed in this environment you need both to communicate interactively and add value. Give them something for interacting. It could be tips, discounts, compelling stories, etc., with the key being it needs to be something they value.

Customers expect communication

Consumers now expect two way communication. When they are dissatisfied, not only will they communicate this to you but they expect a (fast) response. Consumers expect a two-way dialogue with brands and personalized ads relevant to their needs. Even if you are sending a newsletter, it should be personalized based on your customers’ preferences.

Go to the customer, don’t expect them to come to you

An evolving opportunity with social media marketing is participation marketing. With participation marketing, you build a team around an event that is going to happen on social media, then have them talk about it and respond very quickly (Super Bowl, Oscars, World Cup, eSports, etc.). Rather than creating the event, you piggyback on to a topic people are engaged with, connect your product or game with that content, and create a conversation with potential customers.

Once you engage with customers, on their terms, you can then bring them to your assets. Reaching people in areas they are most interested in, engaging them with content that is directly relevant and taking them through to your owned resources.

How to create great content

Unlike the Mad Men era, content is no longer about making the brand look great. Good content is now focused on the customer and not the brand. The key is when creating content you should put people first, with the product in the background. Good content should be focused on the customer, not the brand.

At a high level, there are four keys to creating compelling marketing content:

A brand should start with a clear vision, focus or story

The vision should be set at senior or strategic levels

The vision must permeate all levels of the business and there should be a long term commitment to the strategy with clear objectives

The vision must be aligned with and support a brand’s DNA

Overall, a successful content strategy is clear and aligned internally not only in the marketing department but with all decision makers.

Key takeaways

Marketing has evolved to an engagement model, where rather than talking to to your customers you provide them value and engage in two-way communications.

Rather than expecting your customers to see your content or visit your owned media sites, you need to reach out to them where they are, for example when they are online discussing a sporting event.

The key to creating effecitve content is putting people first, with the product in the background

Neuromarketing is a very exciting new field that is driving business growth, think Big Data ten years ago. The course, taught by Neuromarketing pioneer Thomas Zoëga Ramsøy of the Copenhagen Business School, delves into neuroscience and how both small and large companies can use it. It leverages increasing understanding in how the brain works with the emergence of behavioral economics and data-driven marketing.

While marketing in the past largely relied on intuition, surveys and focus groups, neuromarketing starts by understanding how the brain functions and what parts of the brain drive different behavior. By understanding what parts of the brain drive emotion, motivation, etc., you can then create products and marketing campaign most likely to get customers to purchase.

While I am not the person to summarize how the brain works, below are some of the key learnings from Professor Ramsøy’s course and implications for the game industry.

Cognitive Load

The concept of cognitive load is critical to the success of many products, from games like slots to apps like Uber. Given the the human brain consumers 20 percent of the body’s energy but only is 2 percent of the body’s mass, it is important to understand that people will subconsciously work to reduce the amount of energy the brain is using.

Cognitive load is how much info people are processing at any one time. Cognitive load is tied to working memory, the more information in that short-term memory the higher the cognitive load. As cognitive load increases, consumers are less likely to make a purchasing decision.

The concept of cognitive load also confirms why UIUX is often better when simpler. A simple user experience minimizes cognitive load, thus not creating too much strain.

Implications

It is important to manage proactively consumers’ cognitive load. Giving consumers many choices increases their cognitive load, thus making them less likely to purchase. Thus, it is critical that rather than giving your customer 25 different packages they can buy, keep the purchasing decision simple.

While simpler is better is often considered the goal of UIUX, it often is abandoned so new features can be added. The reality is that simpler is more important than features and you need to build your products not as a tradeoff between the two but as something that focuses on minimizing customers cognitive load.

Uber is a great example of the success of this strategy. From a very simple interface to only a few options to not even letting customers think about tipping to not even having to worry about paying, using Uber requires very little thought. Yet this incredibly simple app has made Uber worth over $60 billion.

Not only is cognitive load important when creating the overall product but also the underlying mechanic in the product. People often question the enduring popularity of slot machines. There are, however, virtually no game mechanics that have lower cognitive load than slots. The slot mechanic provides entertainment without using too much energy. When creating other mechanics, it is critical to understand how much mental energy they will consume.

Search and attention

One of the most powerful applications of neuromarketing is related to search and what consumers select following the search process. Critically, there are two types of search, and each is driven by different parts of the brain.

First there is bottom-up search, which is largely unconscious. This is where a person comes across something and it grabs your attention. Certain receptors in eyes more receptive to things like contrast and density. The best example is when you are in a grocery store and you notice something you were not planning on buying. This type of search is generally driven by colors, shape and density. Consumers are likely to buy some that grabs their attention. As much of consumer behavior is unconscious,

The other type of search is top-down, which is primarily conscious. This is when somebody is searching for something in particular. You may again be in a grocery store and looking for eggs. You will focus your mental energy on thinking hard and finding what you need.

Implications

You need to design your UIUX based on what type of search your customers will be conducting. If they are conducting a top-down search, then you do not have to prioritize making it that visible. They will find it regardless. Conversely, if you want to engage your easier (get them to try a new feature or new content or have them think about monetizing), then you want to stand out during a bottom-up search.

In this case, there are some great new tools for UIUX to optimize visual search results. Professor Ramsøy, who taught the course, has a commercial product called Neurovision. Neurovision allows you to put in an image of your game (in our case) and see what players will notice without the need of a fancy heat test, thus what will jump out in a bottom-up search (see example below):

It is also often used by retailers (including Walmart and Home Depot) to understand what consumers will see while walking through their store, it can even analyze what people will notice during videos. Neurovision is one of a host of new products based on Neuroscience that help you scientifically improve your products rather than relying on anecdotal experience with a limited number of users.

Branding

The value of brands is often debated but neuromarketing shows the value of a brand. Brands impact how we perceive and enjoy a product and stimulate additional parts of the brain that the product would not normally impact.

As discussed with cognitive load, the brain uses a lot of energy and consumers are constantly looking at ways to minimize this energy usage. Brands help consumers save energy because when they see a brand they are familiar with, the branding fills in a lot of information that they do not have to then ascertain (quality, style, etc.). Thus, when deciding between a branded product and a brand they are not familiar with (or no brand) the branded product has an advantage as choosing it requires less energy.

While this analysis may not seem like neuromarketing, neuromarketing confirms it. When people who have been exposed to branding for a certain paint are then in the paint section of a hardware store, eye-tracking confirms that they spend more attention on products from brands they are aware of. This phenomenon then leads to a higher likelihood of purchase.

Branding also helps with search, particularly bottom up search. While a consumer focused on finding a specific product or specific feature set may not respond to branding, as they are doing a top-down search, someone who is browsing for a new product (say a new casino app), a familiar brand would make it more likely to gain a customer’s attention.

Finally, branding stimulates parts of the brain that then impact how consumers feel about a product. A strong brand will create positive emotions around a product even before the consumer evaluates the product.

Implications

Branding is not dead or useless in a performance marketing world. Strong brand can translate into a higher impact from your performance marketing, customers are more likely to click on your ads. They are also more likely to pick your product when searching organically for one.

Using Neuroscience

Neuroscience is a strong tool to help improve your product and marketing. By understanding how the brain processes information, you can tailor your product and marketing to optimize your chances for success.

Key takeaways

Neuromarketing, based on neuroscience, uses understanding of the brain to drive product and marketing decisions, just as big data creates much higher returns.

You can increase sales and satisfaction by minimizing cognitive load, how much your customer’s brain has to process navigating your app or store

Your UIUX should account for whether your customer is conducint a top-down search (looking for something in particular) or bottom-up search where you want them to find something.

A colleague of mine recently used in a presentation a chart from a Harvard Business Review article and it was so helpful in defining a new product I wanted to share the concepts with everyone. In The Elements of Value by Eric Almquist, John Senior and Nicolas Block of Bain’s Strategy Practice, the authors discuss that while consumers evaluate a product by its perceived value versus cost, most marketers and executives focus on the price side of the equation. They attribute this focus largely to it being easier to manage price, as there are limited variables involved and it is easy to test.

It is more challenging to measure and optimize what customers truly value, whether functional (giving someone more capabilities) or emotional, because it is often a combination of multiple components. While value is always intrinsic to the customer (different people have a different value for the same attributes), the authors have identified universal building blocks of value to improve performance in current markets or enter new markets. Their analysis shows that the right combinations of these attributes leads to higher customer loyalty, greater willingness to try a brand and sustained revenue growth.

In the article, they have identified 30 elements of value (see below), fundamental attributes in their most essential and discrete forms. You can categorize these components in four buckets:

Functional

Emotional

Life-changing

Social impact

From Harvard Business Review, Sept 2016

Some are inwardly focused, like motivation, while others help people deal with other or operate in the world, Not surprisingly, the Value Pyramid is related to Maslow’s Hierarchy of Needs. For those not familiar with Maslow’s work, Maslow’s hierarchy of needs is often portrayed in the shape of a pyramid with the largest, most fundamental levels of needs at the bottom and the need for self-actualization and self-transcendence at the top. The most fundamental and basic four layers of the pyramid contain what Maslow called “deficiency needs” or “d-needs”: esteem, friendship and love, security, and physical needs. If these “deficiency needs” are not met – with the exception of the most fundamental (physiological) need – there may not be a physical indication, but the individual will feel anxious and tense. Maslow’s theory suggests that the most basic level of needs must be met before the individual will strongly desire (or focus motivation upon) the secondary or higher level needs.

According the Almquist, Senior and Bloch, “the elements of value approach extends his insights by focusing on people as consumers—describing their behavior as it relates to products and services….The elements of value pyramid is a heuristic model—practical rather than theoretically perfect—in which the most powerful forms of value live at the top. To be able to deliver on those higher-order elements, a company must provide at least some of the functional elements required by a particular product category.”

Depending on your industry and product, the elements of value will vary. Some industries or geographies will focus more on basic elements, those near the bottom of the pyramid, while others will be focused higher.

Product lifecycle is critical

One area the authors did not explore that I think is critical is product lifecycle. Also, although not a feature of the article, an industry’s stage of development strongly impacts which elements will drive value for a consumer. In an emerging industry, consumers will be much more driven by the functional features. As an industry matures, you no longer will be able to compete on the functional elements but instead will need to move higher up the pyramid. Everyone in the industry will be providing the functional features, so you will have to deliver emotional value. Even there, your competitors will catch up and you will then have to deliver life changing or social impact attributes.

The social slots business is a great example of how the value pyramid has driven success. Five + years ago, companies experienced great success just by providing an online version of slot machines that people formerly only played in casinos. As long as you had a game that worked, priced it correctly (free to play) and made it simple to use, you had a ticket to print money. As the market became more mature, emotional attributes became the factor that generated success. Companies late to the market leap-frogged the Functional leaders by making the products nostalgic (classic slots by DGN or Rocket Games) or better design and more attractive (Hit It Rich by Zynga). As the market gets even more mature and competitive the companies that are experiencing success are those that are introducing life changing elements, primarily affiliation and belonging (such as Huuuge Games).

Using the elements to grow

An area where the elements can help you succeed is by improving on the elements that form your core value, so you can differentiate from the competition and better meet your customers’ needs. The elements can also help you grow your product’s value without overhauling your game or product.

Some companies use the elements to identify where customers see strengths and weaknesses. First, they look at which elements are important in their industry and how they compare with competitors. Then if there are any significant gaps, the priority is eliminating those gaps. Once the gaps are closed, you can then see what elements could create a new gap above your competitors.

Implementation

To leverage the elements model effectively, you should integrate it into several key areas of your business:

New product development. The elements framework should provide ideas for new products and enhancements to existing products.

Pricing. If you are looking to increase your prices, you can soften the blow of the increase by concurrently increasing the value your customer receives from your product. Amazon Prime is a great example, as the service started at $79.99 (I think) with frequent discounts and is now significantly higher but the free shipping is only a side thought, as you get everything from streaming services to special credit cards.

Customer segmentation. Rather than only segmenting customers by demographic or behavioral group, you can use the elements to segment them by where they are deriving value. You can then focus on delivering more of the elements that these segments want or highlighting the elements that may exist but they are not aware of.

While adding value to increase competitive is not the most unique or newest idea, Almquist et. al., have created a framework to focus on creating the most value for your customers and knowing where to focus to increase that value. If you continue to deliver more value than your competitors, you will succeed.

Key takeaways

There are 30 core elements that drive the value a consumer derives from a product and the more they are willing to spend on the product

The values are hierarchical, similar to Maslow’s hierarchy of needs, and once a consumer gets the base value they will be more engaged by life changing or social impact elements.

The value you need to deliver is based on the life stage of the industry. Young industries are focused on functional value while you need to deliver higher level value to compete in a mature industry.

I don’t very often disagree with Netflix strategy, but the way they drop content is probably sub-optimal and Netflix can learn much from the mobile game industry. One of the key drivers for success for a free-to-play game is the release of new content. To succeed in the space, game companies have to launch enough content to keep players engaged and returning regularly, while also making sure the high valued players never run out of content. It is a tricky balancing act because content is not free, and it is particularly difficult to create compelling content, so you need to release the content that will optimize value to your players.

Netflix also grasps the value of content. It has gone from a distribution platform (initially DVDs, then streaming) to a content company. Their focus now is on creating Netflix Original series (House of Cards, Narcos, Stranger Things, Daredevil, etc.), as content is what is driving people to subscribe and then stay with Netflix.

While I am very cautious whenever I criticize Netflix (it has a great understanding of its customers through very sophisticated analytics), their approach to releasing content is not as strategic as mobile game companies. Netflix largely pioneered binge watching, releasing a season of content at one time and encouraging customers to spend a day or so watching all of the episodes. The benefit of this approach is that it creates anticipation leading up to the new season and customer focus during the binge. Game companies, however, have learned it is best to release a stream of content regularly rather than in large bursts.

Why regular content releases are optimal

A steady stream of content creates habits for consumers where they come back regularly to see what is new. If a mobile game company launches a new slot every couple of weeks or a mid-core company releases a new military unit, the player will return regularly to see what the new content is. Even if the content is not what the customer is looking for, they will then return in the future to see if there is something closer to their desires.

What companies also find is that consumers and players, particularly the high valued ones, churn through content much faster than you expect. Thus, you might feel that the 50 new levels you have launched is enough content to keep players happy for months, but your biggest spenders are likely to consumer it in weeks or even days and then have no reason to return to your game or site. A steady stream of content, however, allows you to manage how quickly they consume the content and always ensure they have something new every few days or weeks.

Regular content releases also increases word of mouth marketing. People often will discuss with their friends and colleagues what happened in the previous episode and what they expect to happen next. Binge watching if anything is the opposite, since you see the entire story arc (at least for the season) in a short period, unless you share that short period with your friends you are encouraged not to discuss the show because you do not want to provide spoilers. While not as strong a force in games, new content is one of the more powerful drivers of social media engagement, and by providing it regularly you ensure strong engagement over time.

Content is also one of the strongest, if not the strongest, triggers for monetization. By releasing content regularly, you are also triggering monetization regularly. While a big drop of content may trigger a large spurt in monetization (or subscriptions if you are Netflix), a constant stream gets people purchasing weekly or every few weeks.

The biggest reason a stream of content is best

The strongest driver of value from regular content releases is that you become part of your customer’s consciousness, you get inside their head. Dan Ariely, the noted behavioral economist, was a Board of Advisor’s member of my first company, Merscom, and taught me perhaps my most valuable lesson in business, the key for an entertainment product to be successful is for the customer or player to be thinking about it when they are not playing. I remember the early days of Facebook games, when people would wake up in the middle of the night to tend their crops in Farmville or tend to their pets in Pet Society, both of those games made hundreds of millions of dollars for their creators. When 24 first hit television (before it turned into 48, 72, 96, etc.), it captured a huge audience share because viewers would spend the week thinking about and discussing what was going to happen to Jack next. These entertainment experiences truly got into the minds of fans even, and maybe more so, when they were not enjoying the product.

An anecdotal example

A recent experience drove home why a steady stream of content is better than bulk content drops. There are two series that I like about equally, Amazon’s Prime Man in the High Castle and Designated Survivor (on Netflix in Europe). The former follows the binge watch model, the first season was released a year ago and the new season was released in December. After watching the first season of Man in the High Castle, I probably did not watch anything else on Amazon Prime for about ten months. I also pretty much lost interest in the series and while I did watch the second season, it did not elicit the emotions the first season did (it could have been due to the actual content, though trying to look at it objectively the seasons seemed comparable). When I returned to watch season two, I noticed other Amazon Prime originals I was interested in and put on my watch list. With the binge watching strategy, Amazon lost a chance to have me more engaged (and thus potentially sell me other Amazon products) and made me less likely to watch season three.

Conversely, Netflix released new episodes of Designated Survivor on a weekly basis (I believe it is an ABC series and not a Netflix original so they did not control the content cadence). I found myself not only coming back every week, but coming back every few days as I was not sure when the new episode would appear. Moreover, I kept thinking about the plot twists and nuances in the series, which has made my enjoyment of the series increase significantly over time and prompted me to discuss it with friends. With the regular content cadence, Netflix has kept me more engaged while increasing the bond with the customer.

The consequences of getting it wrong

Many of you are probably thinking the same thing I was, well if Netflix is doing it wrong, sign me up. So if Netflix has the content cadence issue wrong, why are they so successful?

As I wrote in a previous post, industry leaders and not omniscient. They are often leaders because they are great companies and are providing great value to their customers or players, but they are not perfect. This underlying value can often cover many mistakes, or at least sub-optimal behavior.

That seems to be what is happening with Netflix. They have evolved into such a strong content creation machine, with the ability to create hit series regularly; they have replaced regular release of new episodes of popular shows with simply releasing new popular shows regularly. Thus, when you finish your season of Narcos, you keep coming back for Luke Cage and then Stranger Things. It is not optimal as it is expensive to create continually new series and at some point the creative juices may be as successful.

My money is on Ariely

When planning your content strategy, I would always put stock in the thoughts of Dan Ariely. Create a strategy that always keeps your content, and thus your company, in the mind of consumers. That way you will keep them engaged and ensure your best customers keep spending with you.

Key takeaways

The mobile games industry has discovered that release content regularly (weekly, fortnightly, etc) is optimal in creating player engagement and monetization.

The practice of releasing large quantities of content once or twice a year, the binge watching promoted by Netflix and Amazon Prime, is not as effective as regular content releases.

The greatest disadvantage of large content drops is that the content fails to integrate with the customer’s consciousness when they are not watching or playing, thus making customers less valuable.

Key takeaways

The key to marketing to millennials is that marketing alone won’t succeed. Millennials will not be influenced by great 1-to-many brand marketing.

Instead, you need to create more value, more entertainment for the money, than their alternatives (which are not only casino products, but any form of entertainment).

You also need to provide a simple, compelling experience across platforms, allowing your users to have a unifed experience wherever and whenever they want.

Marketing social casino to millennials

I am speaking next week at EiG on marketing to millennials and wanted to share the key lessons you can apply to create a social casino offering more competitive for millennials. This is an issue that has caused consternation in the land based and online casino space for the past several years, as younger people are less likely to participate in traditional casino gaming. Rather than wringing your hands about the situation, there are several keys to staying relevant with the millennial demographic:

Marketing is two way. Rather than focus on delivering a message to potential millennial consumers, you need to build a conversation. One to many advertising is largely ignored by millennials, if they are even watching your ads on television or have not deployed ad-blocking software online, they are probably tuning out the advertising. Thus, to introduce potential customers to your product or game, you need to engage them in conversations. You can start the conversation on a blog or social media (Twitter, Facebook, Medium, etc.) but the key is to have conversations with as many potential customers as you can, not try to deliver a message to them. Engage with them, even when they do not agree or like what you are saying, continue the conversation while listening to your potential customers. You can only build relationships with millennials if you talk with them, not talk at them.

You can’t trick them. Much marketing, especially promotions, has been centered around convincing people to do what they do not want to do or should not do. This strategy, a mistake with millennials, takes two directions. First is the traditional grocery store trick, 5 for the price of 4, to get consumers who only want to buy one or two of an item to buy more than they need. The second is promotions with such convoluted T&Cs that the user never sees the benefit of the promotion. While these tactics have traditionally worked, it fails dramatically with millennials. They are more sophisticated in understanding why a company is proposing a certain promotion and are cynical enough to dissect the promotion to understand its actual benefits. Moreover, they have information readily available (it’s called Google) to find the offers that will benefit them and not fall for the ones that only benefit the company making the offer.

Provide value. Since promotion won’t drive usage, you need to provide more value to users than alternatives (which may be other casino games, but also eSports, television, etc). Thus, if they are going to spend $5 or $500 in your product, they need to get more entertainment value from that expenditure than they would from an alternative (and there are many alternatives). Thus, your pricing needs to be about delivering value, not by getting as much from the player as quickly as you can.

Create a simple digital cross-platform experience. Marketing and product are not two separate silos with millennials. You need to build a product that will appeal to them as marketing expertise will not make up for a sub-optimal product. For millennials, the key is creating a product that works across platform, or is platform agnostic, so they can use it on their laptop, their smartphone, their tablet, whenever and however they want. The experience needs to be consistent across all of these platforms (don’t ask them to set up separate accounts). It also needs to be simple, they are not going to spend an hour learning how to play, or even 5 minutes, they need to be able to start using the product immediately and enjoy it immediately.

Only great experiences will succeed

The key to succeeding with millennials is providing them with a great experience, not a great marketing campaign. They will not respond to marketing that does not deliver value, but if you give them a better experience than their alternatives they will respond accordingly.

Key takeaways

Creating a great new innovative products does not guarantee success, people have to find and try it.

The first key is to build something that people will search for. If there is little innovative or differentiated products, people will not even search for a new product.

If customers will not find a product via search, you need to develop cues so they will infer that the product is different and valuable to them.

One of the most frustrating results in business is launching a great game or product and then seeing it fail. Unfortunately, this phenomenon happens more often than not. In the game space, at least 80 percent of new launches (from established studios, new studios have a worse rate) are never ROI positive (that is, they never have an LTV that allows for ad spend). Even in retail, according to a recent study of 9,000 new products that generated strong distribution, only 40 percent were sold three years later.

Although I am a huge advocate of Blue Ocean Strategy, one central challenge is getting customers to adapt the new product. In the game space, many innovative and extremely fun products fail because they never gain traction with players.

A recent article in the MIT Sloan Management Review, Why Great New Products Fail by Duncan Simester, shows why so many good products fail and how you can reduce the risk of experiencing this fate. What Simester shows is that while most companies focus on customers’ needs, they do not understand how customers decide what to purchase. By understanding the customer search and inference processes, you can build a better strategy for the customer to discover a new, innovative product.

People don’t search for innovation

The first thing you need to realize is that in a market with little innovation the customer may not realize the value of looking for a better solution, they do not even think they exist. Thus, they may not find your innovative product because they do not know to look.

People Do Not Know To Search for Innovative Products

Alternatively, people may think the cost of searching for an alternative or innovation is too high despite knowing of the benefits. Somebody may realize there is a game in the App Store they would prefer to what they are currently playing but do not believe it is worth the effort to search through the thousands (or millions) of alternatives, download and test tens (or hundreds) and then find the innovative product they prefer.

Additionally, your best customers are the ones least likely to search. Research cited by Simester shows a strong relationship between the amount of prior expertise a consumer has about a product category and the extent they search for information before making a purchase decision. Effectively, the person feels they already know what is best so they see little incentive to search.

Compounding this problem is that potential customers with virtually no knowledge also will not search. They do not know what questions to ask, where to find answers or how to interpret the information if it arrives. Potential customers also do not understand the features that would benefit them. Thus, innovation would not increase the chance of a sale to this type of customer, no matter how much value the innovation adds, because the customer does not understand the value of the innovation.

Customers’ Inference Process

When search is incomplete, customers shift to forming inferences. They use what they observe to infer what is too difficult or costly for them to search for. A good example Simister uses is McDonald’s obsession with keeping parking lots clean. While customers do not really care if the parking lot is messy, if they see a dirty parking lot they will infer that the restaurant itself is dirty and go somewhere else. As Simester writes, “Although purchasing decisions are a different neural process than the visual process, a similar phenomenon occurs when customers are evaluating different products or services. Customers often do not realize they are forming inferences, and even if they do, they are powerless to stop it.”

Branding and inference

The most common cues customers use to infer product value are brand and pricing. Brands infer more than only product quality as consumers use brands to signal information about themselves.

The importance of brands differ by the market and consumer. When it is easy to search and generate information about the product, brands take on less importance. This is particularly the case with the sophisticated customers described above, as they can process the product information and make informed decisions about the opportunity. Conversely, an unsophisticated customer is likely to rely on the brand because they do not know how to process the product information.

In the game space you see very little value of brand because so much information is available to players. They can look at an AppStore description, process screenshots and watch videos to determine if they like a product, rather than care whether the game is from King.com or Supercell.

The role of the brand also varies across product features. Features that are on the spec sheet typically can be discovered by search. Other features, however, such as reliability and ease of use, are not easily available and thus it is these features where the brand’s role are most prominent. Going back to the earlier game example, a player may rely on their perception of a brand to determine how aggressive monetization will be, how often the game will be updated and how reliable the back-end is.

What you should do differently for innovative products

Given the challenges of conveying to users the value (or existence) of an innovative product, you need to build new products where customers can recognize their value. Thus, during your green light or incubation process, you should look at three aspects of the potential product.

Motivation to search. Will customers discover your innovation? An innovative offering will not succeed if customers do not discover it. First, are customers motivated to search? Are they willing to invest time to find a better option than they are currently using?

Ability to search.Can customer search effectively? Can reviews, customer or professional, help alleviate the issue.

Customer inferences. If customers cannot or will not search, you need to understand what cues consumers will use to infer the absent information. You may want to create cues to help customers with this inference process.

Innovation is not just about great products

The key is that innovation is not just about building a great product. When you are planning your new products, you need to understand if and how customers will find out about it. Build that into the product, or possibly seek an alternative if there is no clear way to educate users.

Get my book on LTV

Understanding the Predictable delves into the world of Customer Lifetime Value (LTV), a metric that shows how much each customer is worth to your business. By understanding this metric, you can predict how changes to your product will impact the value of each customer. You will also learn how to apply this simple yet powerful method of predictive analytics to optimize your marketing and user acquisition.

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Lloyd Melnick

This is Lloyd Melnick’s personal blog. I am EVP Casino at VGW, where I lead the Chumba Casino team. I am a serial builder of businesses (senior leadership on three exits worth over $700 million), successful in big (Disney, Stars Group, Zynga) and small companies (Merscom, Spooky Cool Labs) with over 20 years experience in the gaming and casino space.